Examples:

• • Maxwell Hansen paid inflated tuition at American and Boston University due to the NCP asset reporting rules those schools adopted.
  • Eileen Chang’s custodial single mom had to take out large PLUS loans for her to attend Cornell since it factored in her noncustodial dad’s disability income that he couldn’t actually contribute.
  • Schools like Brown, MIT, and USC allegedly worked with the College Board to develop and implement the NCP methodology across the board to avoid competing.
  • The lawsuit claims at least 75 schools adopted these harsher aid policies in 2006 at College Board’s urging, instantly reducing grants for thousands of students.

Key Takeaways:

• • This case alleges an illegal agreement between competitors (the schools) facilitated by a trade association (College Board) to fix prices and limit aid.
  • The key evidence will likely focus on communications between the schools and College Board about adopting the NCP policy to avoid competing on aid packages.
  • If true, the claims suggest a coordinated effort to manipulate aid formulas to extract more revenue from certain students based on their parents’ marital status.
  • Antitrust law prohibits agreements between competitors that unreasonably restrain trade, so the central issue is whether the NCP policy is an illegal price-fixing scheme.

FAQs:

• • Is it illegal for schools to use the same financial aid policies? No, not inherently. However, an agreement between competing schools to adopt the same policy specifically to limit competition and inflate prices could violate antitrust law.
  • Does it matter if the NCP policy has some benefits too? Even a well-intentioned policy can be illegal if it derives from collusion between competitors to raise prices or limit competition.
  • How do you prove a conspiracy like this? Smoking-gun evidence like emails discussing the scheme are ideal, but a conspiracy can also be inferred from suspicious timing, communications and economic realities making independent adoption unlikely.
  • Who gets the money if the lawsuit succeeds? Affected students would likely get a cut of any damages or settlement fund, and the schools would have to stop colluding on aid.
  • Will this make it easier to negotiate better aid packages? Possibly – if some schools stop considering divorced parents’ combined assets, it could force others to compete by offering more generous aid too.

Examples:

• • The complaint alleges the schools engaged in a conspiracy to jointly develop and adopt the NCP policy to avoid competing on price through aid packages.
  • If proven, an agreement between 40 elite schools to raise net prices by reducing aid would likely be deemed an unreasonable and illegal restraint of trade.
  • The plaintiffs argue this is a per se illegal (automatically unlawful) horizontal price fixing agreement between schools that are competitors in the market for elite higher education.
  • Evidence of schools jointly developing the policy with College Board and pushing others to adopt it could help prove an actual conspiracy existed.
  • The plaintiffs will have to show not just personal harm, but that the agreement reduced competition marketwide and forced all students to pay inflated prices.

Key Takeaways:

• • This lawsuit hinges on Section 1 of the Sherman Act, the core antitrust law prohibiting anticompetitive agreements between competitors.
  • The plaintiffs’ theory is that the schools entered an illegal conspiracy to jointly adopt rules that limited competition and inflated prices in violation of antitrust laws.
  • As a horizontal agreement between direct competitors, the NCP policy may be evaluated under the harsher per se illegal standard for manifestly anticompetitive restraints.
  • To prevail, the plaintiffs will need to show a specific agreement existed, that it caused marketwide anticompetitive effects, and that they suffered antitrust injury as a result.

FAQs:

• • What does Section 1 of the Sherman Act prohibit? Agreements between competitors that unreasonably restrain trade, such as price-fixing, bid-rigging, market allocation, and group boycotts.
  • What’s the difference between per se and rule of reason analysis? Some agreements are deemed so anticompetitive that they are automatically illegal per se, while others are evaluated case-by-case under the rule of reason weighing procompetitive benefits.
  • How do you prove an agreement violates Section 1? Plaintiffs must show: (1) an agreement between competitors; (2) intent to restrain trade; (3) actual restraint of trade; and (4) antitrust injury/standing.
  • What are the potential penalties for a Section 1 violation? Plaintiffs can recover triple their actual damages, injunctions to stop the conduct, and attorney fees. Criminal penalties may apply too.
  • Do all parallel business practices violate antitrust law? No – competitors often rationally adopt similar policies unilaterally based on market forces. A specific conspiracy to restrain trade must be proven.

Examples:

• • Plaintiffs cite statements from school officials admitting they could compete better for students by not adopting NCP policies as evidence of a pact not to compete.
  • The rapid shift of at least 75 schools to identical NCP policies right after the College Board started pushing it suggests a coordinated rather than unilateral move.
  • Schools may argue the total finances of divorced families are relevant to actual ability to pay, so it’s rational to consider both parents’ incomes.
  • If schools had good faith, independent reasons for the policy besides a conspiracy to charge more, that could undermine the antitrust case.
  • Defendants will likely attack plaintiffs’ standing, arguing students aren’t harmed by the overall market effects of the policy, just their desire for more aid.

Key Takeaways:

• • The core dispute is whether the NCP policy arose from an illegal conspiracy between schools or their independent choices to meet financial aid needs.
  • Plaintiffs will focus on the timing, communications, and admissions suggesting a coordinated policy adoption to restrain price competition for students.
  • Defendants will stress the schools’ individual interests in considering all relevant financial data and likely attack plaintiffs’ antitrust standing.
  • The factual record on how and why the schools adopted the policy and its actual marketwide effects will be key to the case.

FAQs:

• • What’s the schools’ best defense to the antitrust claims? Arguing they each independently decided to adopt the policy for legitimate reasons, not as part of any conspiracy.
  • Is it inherently illegal to consider divorced parents’ finances in aid decisions? Not necessarily – the issue is whether competing schools illegally conspired to all adopt that approach.
  • Can plaintiffs sue if they would’ve gotten more aid without the policy? They still need to show harm to overall market competition, not just their personal bottom line.
  • What if the schools had different reasons for using the CSS Profile? That could help them argue it was unilateral, not conspiracy – but pretext is still illegal if there was an actual pact.
  • Will it matter if some schools adopted the policy later than others? Not necessarily – an illegal conspiracy can form over time as more competitors join in.

Examples:

• • A class-wide damages award could mean significant tuition refunds or future discounts for students with divorced parents at dozens of elite schools.
  • An injunction barring use of the NCP policy could restore price competition on aid between elite schools and make attendance more affordable long-term.
  • More generous need-based aid for children of divorce may boost their representation on elite campuses and in the corridors of power.
  • Need-blind admissions and need-based aid approaches originated in the Ivy League but spread widely – NCP policy changes could too.
  • The Justice Department has signaled interest in this case as part of broader antitrust scrutiny of college admissions and recruiting practices.

Key Takeaways:

• • The lawsuit has high stakes for students who paid inflated tuition and the schools facing trebled damages, which could total hundreds of millions.
  • Court-ordered reforms could restore price competition in elite higher ed, make attendance cheaper, and diversify student bodies.
  • Any changes elite schools make to aid policies often ripple to other institutions, so the case could spur broader reforms.
  • The case is part of rising government and public interest in antitrust issues in higher education, so schools face more scrutiny regardless of outcome.

FAQs:

• • How big could money damages be if plaintiffs win? Based on the alleged tuition overcharges, total damages could be in the hundreds of millions, which would then be tripled.
  • What injunctive relief does the lawsuit seek? Permanently barring use of the NCP policy and mandating schools compete on aid packages.
  • Will students at other schools be impacted by the case? Potentially – schools often adopt policies pioneered by elite institutions, so aid reforms here could spread.
  • What message does this case send colleges about antitrust? Collaborating with competitors, directly or through associations, is risky and schools aren’t immune from scrutiny.
  • Are other antitrust actions targeting colleges too? Yes – the feds are probing early decision admissions and college-specific financial aid offers for signs of collusion.

Questions: Antitrust Concepts & Standards

• • 1. What federal antitrust law is the main basis for this class action lawsuit?
    • A) The Clayton Act
    • B) The Federal Trade Commission Act
    • C) The Sherman Antitrust Act, Section 1
    • D) The Robinson-Patman Act
  • 2. What competitive relationship must the defendant schools have for Section 1 to apply?
    • A) Horizontal competitors
    • B) Vertically integrated suppliers
    • C) Potential future competitors
    • D) Any market participants
  • 3. What is the key issue for whether the challenged conduct violates antitrust law?
    • A) Whether it affects interstate commerce
    • B) Whether the schools had market power
    • C) Whether it unreasonably restrains trade
    • D) Whether it completely eliminates competition
  • 4. What must plaintiffs show to have standing to sue under Section 1?
    • A) An agreement between defendants
    • B) Personal financial harm from higher tuition
    • C) Antitrust injury to competition from the challenged policy
    • D) All of the above, causally linked
  • 5. If successful, what remedies could this lawsuit achieve for plaintiffs?
    • A) Monetary damages
    • B) Injunctions prohibiting the allegedly illegal policy
    • C) Mandatory reforms to school financial aid practices
    • D) All of the above

Answers: Antitrust Concepts & Standards

• • 1. C) Section 1 of the Sherman Act is the core federal law prohibiting anticompetitive agreements between competitors.
  • 2. A) Section 1 targets unreasonable restraints of trade by horizontal competitors in the same market.
  • 3. C) The key inquiry is whether the challenged agreement unreasonably restrains trade and harms competition in the relevant market.
  • 4. D) Plaintiffs must show (1) a violation; (2) causing antitrust injury to competition; (3) that directly and proximately harmed them.
  • 5. D) Antitrust plaintiffs can recover monetary damages, get injunctions blocking problematic conduct, and secure broader reforms.

Questions: Specifics of the Lawsuit & Allegations

• • 1. What aid application form is central to the allegations of anticompetitive collusion?
    • A) The FAFSA
    • B) The Common App
    • C) The CSS Profile
    • D) The Pell Grant application
  • 2. What specific financial aid policy do plaintiffs allege violates antitrust law?
    • A) Considering both custodial and non-custodial parents’ finances
    • B) Requiring a minimum student contribution
    • C) Prioritizing aid for the lowest-income applicants
    • D) Offering need-based rather than merit aid
  • 3. Which defendant allegedly played a key role in facilitating the challenged agreement?
    • A) Harvard University
    • B) The U.S. Department of Education
    • C) The College Board
    • D) NACAC
  • 4. According to the complaint, how did the alleged conspiracy impact students financially?
    • A) They paid an average of $6,200 more per year
    • B) Their financial aid was reduced by half
    • C) They had to take out twice as many loans
    • D) Their average debt at graduation doubled
  • 5. What market definition do plaintiffs propose for assessing the alleged antitrust violations?
    • A) All U.S. colleges and universities
    • B) Private 4-year colleges and universities
    • C) Highly selective 4-year institutions
    • D) Private national research universities

Answers: Specifics of the Lawsuit & Allegations

• • 1. C) The lawsuit alleges collusion centered on the College Board’s CSS Profile, an aid application delving deeper than the FAFSA.
  • 2. A) Plaintiffs challenge an alleged agreement to all adopt the same policy counting non-custodial parents’ finances in aid calculations.
  • 3. C) The College Board allegedly helped facilitate the conspiracy through the CSS Profile, committees, and pushing policy adoption.
  • 4. A) The complaint alleges that students paid an average of $6,200 more per year in tuition due to the unlawful policy.
  • 5. D) Plaintiffs propose a market of elite private national research universities like the Ivies, MIT, Stanford, Duke, etc.